But the lowered projection still leaves Honda ahead of the previous fiscal year when it posted 268 billion yen ($3.3 billion) profit on 8.58 trillion yen ($105 billion) sales.

Honda said vehicle sales fell in Japan, because of the end of government incentives for green models last year, but improved in North America. Honda's vehicle sales also fell in Europe.

Among Honda's green car offerings are the Insight and CR-Z hybrid models, which are popular but trail the world's top-selling hybrid, the Prius from Japanese rival Toyota Motor Corp.

Honda sold 855,000 vehicles around the world in October through December, down 6.5 percent from 914,000 sold a year earlier. Japan sales slid to 118,000 from 177,000 while North American sales jumped to 364,000 from 344,000.

Honda said there were some signs of a gradual recovery in the key U.S. market but acknowledged lingering worries about tighter credit and high unemployment. It was more optimistic about China and India, where it hopes to expand not only in autos but also in motorcycles.

The surging yen remains a risk for all Japanese exporters, including Honda. It said the dollar traded at about 83 yen during the three months, down from 89 yen a year earlier.